Morocco’s Improving Growth Prospects

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CEIC Macro Watch Global #41 - February 27, 2015 Morocco’s economy may be on the path of a new, higher growth phase. The North African country has been struggling with a high fiscal deficit and persistent external imbalances during times of political unrest. In close succession, Morocco was hit by the global financial crisis, the Arab Spring turmoil in 2011 and a prolonged period of stagnation among its major European Union trading partners. Although the country was recording continuous growth in that period, the economy performed below its potential. In 2014, real gross domestic product (GDP) increased by 2.5%, decelerating from 4.4% the year before. Economic growth was primarily led by the non-agricultural sectors, namely the textile, automotive, electronics and aeronautics industries. The country’s total export receipts reached an all-time high of almost MAD 200 billion, on the back of 7% year-on-year (YoY) growth. The tepid overall GDP growth, however, resulted from poor agricultural output hindered by unfavourable weather conditions. In 2013 the Moroccan government adopted measures focused on enforcing fiscal stability over the long term. Thus, the budget deficit shrank to 5.7% of GDP in 2013 from a peak of 6.8% in 2012 which was inflated by higher social spending and the continuing impact of high oil prices and feeble export demand. The tightening of fiscal policies continued in 2014, when the budget deficit shrank to MAD 49 billion, representing 5.4% of GDP. The plunge in global crude oil prices since mid-2014 will further ease the severity of macroeconomic imbalances for a net energy importer like Morocco. It is anticipated that the reduced expenditures on energy products will steady the government’s budget and reduce the fuel subsidy bill. Lower oil prices are expected to give a big boost to Morocco’s economy which is highly dependent on imported energy commodities. In 2013 petroleum product imports accounted for 26.9% of total imports and 11.7% of nominal GDP. According to the IMF’s forecasts, the crude oil price will average USD 56.73 per barrel this year, compared to USD 104.07 in 2013 (it might be higher than that given the February rebound, but is unlikely to regain its mid-2014 high). The lower energy expenditures will definitely lift the Moroccan economy, resulting in improving budget, trade and current account balances, boosting domestic demand, including consumer spending. By correcting its external position and strengthening its fiscal fundamentals, Morocco is set to enter a new sustainable growth cycle. With improving structural economic balances, the country now has the chance to emerge as one of the fastest growing economies in North Africa, recording real per annum GDP growth rates of 5% between 2015 and 2019, as predicted by the IMF. By Kamen Parushev in Bulgaria - CEIC AnalystDiscuss this post and many other topics in our LinkedIn Group (you must be a LinkedIn member to participate). Request a Free Trial Subscription. Back to Blog